Are the Rates Better?
Of utmost concern for most borrowers is the interest rate. It’s what determines how much the loan costs you aside from the closing costs, so it makes sense. You want the lowest interest rate possible. Chances are that you can get a lower interest rate from a credit union than you could a traditional mortgage lender or bank and that’s for one reason – credit unions are non-profit.
Banks and mortgage lenders are in operation to make a profit. They can’t just give you the break-even number – they have to inflate it so that they make a profit. Without a profit, they probably wouldn’t stay in business. Credit unions just need to break-even. They need to reimburse their costs, but that’s it – they don’t care about profit.
Does that mean a credit union always has the lowest rate? It really depends on your situation. If you have a unique situation that would otherwise cause a bank to inflate your rate because of the risk you pose, the credit union probably wins. If it’s a standard loan without any ‘special issues,’ the bank or mortgage lender may have a little more wiggle room, making them more competitive.
What Else Does a Credit Union do Better?
It’s known that if you have a strange circumstance, you probably want to go to a credit union. Unlike mortgage lenders, credit unions don’t have investors buying their loans. This means the credit union doesn’t have to answer to anyone – they can make their own rules. Sometimes those rules help the borrowers that have unique circumstances, such as high debt ratios, low credit scores, or low down payments.
Credit unions often have ‘niche products.’ They help borrowers that would otherwise be unable to find a loan find the perfect fit. No two credit unions will have the same loan products, though. Each credit union has their specialty and that’s what you have to find out. Is there a credit union out there that will accept your circumstances?
Credit unions also have a little more face-to-face contact. They get to know their members; they are not just another number or another face in the crowd. The credit union likely wants to get you in for other services too, so they are going to provide top-notch customer service to convince you to use their other banking services too.
Of course, there’s no guarantee that a credit union is going to provide you with a better rate than a bank. Only you will know that answer after you shop around with various banks, credit unions, and mortgage lenders.
As you compare your loan offers, make sure you compare the interest rates, closing costs, and APR. Sometimes a lender may seem like they charge excessively low interest rates, only to find out that the closing costs are off the charts. You need to decide which situation suits you the most and go from there. Don’t just assume that you got the best rate available because you went to a credit union; instead, shop around and truly compare your options to see what works for you.